Private Saving. New Cross-Country Evidence Based on Bayesian Techniques

32 Pages Posted: 2 Feb 2018

See all articles by Ignacio Hernando

Ignacio Hernando

Banco de España

Irene Pablos

European Central Bank (ECB)

Daniel Santabárbara

Banco de España

Javier Vallés

Banco de España

Date Written: January 31, 2018

Abstract

The existing literature exhibits high uncertainty over the theoretical and empirical determinants of private world saving. This paper reports new evidence on the drivers of private saving by applying Bayesian techniques, using data from the world’s 35 largest economies in the period 1980-2012. After reviewing the main theories of consumption and saving decisions, and discussing the potential effects of different determinants, we specify a general model that incorporates the most commonly used factors in the literature, considering the potential endogeneity of some of the regressors. The Bayesian Model Averaging (BMA) approach summarises the information embedded in all combinations of the explanatory variables considered by averaging each specification according to its likelihood. We find that in the medium term private credit to GDP ratio, the government surplus to GDP ratio, the terms of trade, life expectancy and the old-age dependency ratio are key determinants of cross-country private saving behaviour. Lastly, we assess the long-term effect of expected demographic changes in private saving globally.

Keywords: consumption, saving, national saving, private saving, household saving, Bayesian model averaging, model uncertainty

JEL Classification: C11, C23, E21, H30

Suggested Citation

Hernando, Ignacio and Pablos, Irene and Santabárbara, Daniel and Vallés, Javier, Private Saving. New Cross-Country Evidence Based on Bayesian Techniques (January 31, 2018). Banco de Espana Working Paper No. 1802. Available at SSRN: https://ssrn.com/abstract=3116059 or http://dx.doi.org/10.2139/ssrn.3116059

Ignacio Hernando (Contact Author)

Banco de España ( email )

Madrid 28014
Spain
+34 91 338 5186 (Phone)
+34 91 338 5678 (Fax)

Irene Pablos

European Central Bank (ECB) ( email )

Sonnemannstrasse 22
Frankfurt am Main, 60314
Germany

Daniel Santabárbara

Banco de España ( email )

C/ Alcalá, 48
Madrid, 28014
Spain

Javier Vallés

Banco de España ( email )

Alcala 50
Madrid 28014
Spain

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